Zambia: After months of health speculations, populist President Sata dies

President Sata died on 29 October at age 77, after receiving treatments for an undisclosed illness in the UK. Sata won the presidential elections in 2011 with the promise of tackling corruption and creating jobs and prosperity.

However, his term was tarnished by crackdowns on the opposition and deteriorating external and fiscal imbalances with large public and private investment costs and a lower copper price.

He pushed through some controversial laws including capital controls, tax increases and a 45% surge in public wages. As of 2012, the local currency came under pressure and hit record lows in 2014. The central bank’s efforts to keep the kwacha stable led to foreign exchange reserves dropping below the 3-month import cover level.

Impact on country risk

It is still not clear who will succeed the President. After Sata left for treatment, Defence Minister Edgar Lungu was named acting president. Nevertheless, Vice-President Guy Scott is constitutionally most likely to become acting president in the interim period of (maximum) 90 days before presidential by-elections.

However, Scott is of Scottish descent and is therefore unable to succeed Sata as president with full executive authority. Furthermore, the Patriotic Front (PF, President Sata’s party) is plagued with factionalism, making it unclear who will be selected as Presidential candidate.

During the campaign period for the presidential by-election, there will be an increased risk of violence between opposition and security forces and an opposition win would moreover increase the risk for government contract cancellations.

Should the PF win the by-election, the risk for contract renegotiation or cancellation will be moderate and the introduction of pro-business policies will become more likely after Sata’s legacy of interventionist policies.

What’s more, the IMF support requested by the government in June to help control the imbalances and stabilise the kwacha, might be postponed until after the election. Undoubtedly, a period of uncertainty is coming up, but in the longer run Zambia might retrieve its investor-friendly reputation and fast-growing dynamics.

Country risk analyst, Louise Van Cauwenbergh, Credendo Group

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